CreditAccess Grameen Q2 Profit Surges 52% Above Estimates, CLSA Raises Target Price to ₹1,600

CreditAccess Grameen announced its financial results for the July-September quarter of FY26, posting a profit after tax (PAT) of ₹130 crore, which was 52% higher than CLSA's estimates. This strong performance was primarily attributed to reduced provisioning expenses and an increase in other income.

Operating metrics also showed improvement, with margins widening by approximately 50 basis points quarter-on-quarter. This was supported by higher lending yields and a lower cost of funds. CLSA anticipates these margin gains to continue in the upcoming quarters.

However, the company increased its credit cost guidance for the current and next fiscal years. Management cited rising overdue accounts following heavy rainfall in some regions, leading to an expected increase in credit costs by 70-100 basis points above previous projections. While asset quality showed sequential improvement, overdues remain above internal expectations.

Growth in loan disbursements nearly doubled quarter-on-quarter, though assets under management (AUM) were broadly flat. Management expects AUM growth to accelerate to 14-15% by the March quarter and aims for 20% growth in the second half of FY26. Full-year growth is likely to be at the lower end of the company's 14-18% guidance range. The company also expects its return on assets to approach 4.5% in FY27.

Impact: This news is significant for CreditAccess Grameen shareholders and investors in the microfinance sector. The better-than-expected profit and improved margins are positive, but the increased credit cost guidance due to regional weather impacts introduces a note of caution for the near term. CLSA's decision to maintain a 'hold' rating while raising the target price reflects a balanced view. Impact Rating: 6/10

Difficult Terms: Profit After Tax (PAT): The profit remaining after all expenses, taxes, and interest have been deducted from the total revenue. Provisioning Expenses: Money set aside by a company to cover potential future losses or bad debts. Other Income: Income earned by a company from sources other than its primary business operations. Operating Metrics: Key performance indicators that measure a company's day-to-day operational efficiency and profitability. Margins: The difference between revenue and the cost of goods sold or services provided, indicating profitability. Lending Yields: The effective rate of return a lender receives on a loan. Cost of Funds: The interest rate a financial institution pays on its borrowings. Credit Cost Guidance: An estimate provided by a company on the expected losses from loans that may not be repaid. Overdue Accounts: Loans or payments that have not been paid by their due date. Asset Quality: The measure of the credit risk associated with a company's assets, particularly loans. Disbursements: The act of providing loans or funds to borrowers. Assets Under Management (AUM): The total market value of all financial assets that a fund company manages on behalf of its clients. Return on Assets (ROA): A financial ratio that indicates how profitable a company is relative to its total assets.